Generally, the law of supply and demand operates. Supply of something goes up, and there’s downward pressure on the price of it.
However, ask any real estate agent about what determines value, and many will say “location, location, location”.
Location obviously matters. Beverly Hills apartments will cost more than East LA apartments, because the location is “better.”
Real estate is not a commodity where every unit of housing is identical to every other unit of housing.
So the creation of a unit of housing does increase the supply, but the effect on the prices depends on other factors, like “location”.
Gentrification is the process of taking existing real estate, and altering it so different things about it change, and the prices of rent, food, and other things in the area goes up.
You can’t change the physical location – the building or parcel of land can’t move – but you can “change the location” by changing the building through demolition, changing the residents through eviction or buyouts, changing the name and erasing history, and even changing the relation of the place to the government.
The standard YIMBY argument is that building new apartments increases supply, which drives down prices for apartments.
Gentrification
In reality, this doesn’t happen, at least not next to the new apartment. When construction is done with the goal of GENTRIFICATION, in a location where rents are low, the rents rise.
The new building will have higher rents than all the other older buildings, because it’s new.
The land values near the new building will rise, because they are now located next to a new building, with new customers.
If the new apartments are expensive, you start to see more white people, because the higher up you go in society (in America) it gets more white. This can raise rents, because of racism.
As more people with social power enter the place, the relationship with the police and local government changes. The cops might become nicer to you, or not, depending on how much you resemble the gentrifiers.
The local government might decide to celebrate the hip new businesses, and help them become successful, to keep rents up.
As the rents rise, the landlords are motivated to evict the existing tenants, and get new, richer tenants in.
None of these things are “cause and effect”, but a constant back-and-forth of “causes, effects, causes, effects” where causes turn into effects and effects become causes.
During this time, the existing residents get mad, because, some start to realize that the local government has been neglecting the existing community, not investing in the area, and maybe even taking the taxes from the area and spending them in wealthier areas.
The Banlieues
In America, until recently, the wealth was in the suburbs, and the poverty was in the cities.
In France, it’s the opposite. Paris is wealthy, and the suburbs are poor. The suburbs are called “the banlieues”.
This is what’s happening in America. The suburbs are now where poverty settles, while the downtowns gentrify.
If there’s a place where the rents might drop, it’s the suburbs.
